Canada must send strong signal to U.S. on trade war

It was disappointing to hear federal Agriculture Minister Lawrence MacAulay say Canada won’t do anything substantial to help Canadian farmers who will likely be affected by the growing trade dispute between the United States and China.

In a scenario that will likely see prices affected worldwide, Canadian farmers will be caught up in the fray.

The U.S. has announced a $12-billion contingency fund for American farmers to support producers during the trade dispute as a short-term measure. This is on top of the $19 billion in annual subsidies given to U.S. farmers.

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At a meeting in Vancouver late last month, MacAulay and provincial agriculture ministers rejected the Canadian Federation of Agriculture’s plea for contingency measures to make up for income loss created by the trade dispute.

Canadian farmers, said MacAulay, will have to rely on existing programs, which are not subsidies.

President Donald Trump ordered tariffs of $34 billion placed on Chinese goods that took effect last month. China responded with equivalent tariffs. The U.S. is now threatening $200 billion in tariffs on Chinese imports, and China is considering another $60 billion in tariffs on U.S. goods.

The U.S. sells about $12 billion in soybeans alone to China each year, so with that crop likely frozen out of the Chinese market, surplus soybeans may well flood other markets. And prices of other crops will likely see similar price effects.

(Canada and the U.S. have their own tariff dispute, which will also likely affect prices.)

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The $12-billion support program in the U.S. has three components: direct payments to farmers for soybeans, sorghum, corn, wheat, cotton, dairy and hogs; buying up foods, fruits, nuts, rice, legumes, beef, pork and milk to give to food banks and other nutrition initiatives; and marketing efforts for agricultural goods.

One U.S. senator, Republican Ben Sasse of Nebraska, likened the support program to “gold crutches” for farmers.

Yet in Canada, we appear to be timid. While Prime Minister Justin Trudeau has insisted Canada “won’t be pushed around” by the Trump administration, our farmers may well be struck by the body blow of lower prices due to the trade disputes.

In requesting action, CFA president Ron Bonnett said there is uncertainty about how the scenarios will unfold, but a drop in prices is possible.

Canada exports about $56 billion in agriculture and agri-food goods annually. Agriculture accounts for about 6.7 percent of Canada’s gross domestic product. A drop in prices would affect farm incomes — and it is farmers, rather than those higher in the value chain — who will bear the brunt of this trade dispute.

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The subsidy program in the United States is likely intended to bolster support of a key demographic for the Republicans ahead of the mid-term elections later this year. The party is in danger of losing the House of Representatives, so sprinkling money to the faithful is politically expedient.

U.S. farmers, even those who support the president, are strongly cautioning the administration that the trade dispute must not go on for long — not just because of the effect on prices, but because they cannot afford to lose market share.

Kansas Republican Senator Jerry Moran said of the tariffs: “The long-term implications of disrupting supply chains and losing market shares that took decades to build up is perhaps even more concerning (than short-term effects.)”

It would seem expedient for Canada to signal to the U.S. that it is prepared for a long-term fight.